DMA Comment: HMRC, VAT Policy and Digital Advertising

Over the last year, The Charity Tax Group (CTG) has been engaged in a dialogue with HMRC regarding its policy relating to VAT paid by charities (and their agencies) on digital advertising.

CTG wants to hear from charities and agencies working in the third sector to understand the impact of these changes (details below).

The discussion has centred around advertising on third-party online platforms, particularly via social media, and that this is at individual browsers, thus failing to meet the zero-rating criteria.

Over recent months CTG has liaised with charities and advertisers, including their technical staff, and have considered the reasons as to why this may be incorrect.

However, in its most recent update, CTG has shared the latest interpretation from HMRC, which could pose a significant cost to the charity sector. The biggest impact could be that any judgement is implemented retrospectively, meaning the charities sector could not only have their ability to market themselves cut today, but also have a hefty bill for back-taxes.

Chris Combemale, CEO of the DMA, said of the latest response: “Charities across the UK do fantastic work to help those in need.

Certain forms of advertising have been made exempt from VAT to allow these organisations to aid them in these endeavours. The latest interpretation from HMRC seems to go against these principles, as an ad should be treated as an ad no matter the medium through which it’s delivered.”

CTG has said it is considering its position and recommends all charities and agencies working in the third sector consult their own advisors.

The DMA will continue to take an active role in these discussions alongside CTG and would encourage members to share their views. There will be a meeting at 10:00 am on 29 November at the offices of the IPA (44 Belgrave Square London SW1X 8QS) where possible next steps will be discussed.

Combemale continues: “This latest interpretation would significantly impact the sector’s ability to do its great work, moreover, backdating these costs years seems punitive and could put some of these fantastic organisations out of business.

As such, we encourage all members affected by this policy from HMRC to get in touch and take part in the discussions over the coming weeks. We need your experiences and input to help us get a fair deal that allows charities to continue the great work they do.”

To attend that meeting or share your views on the impact of HMRC’s interpretation, please contact Mike Lordan, Director of External Affairs at the DMA, at Mike.Lordan@DMA.org.uk.